Book review: The Value Elephant promises ways to build lasting wealth
Sanjay Kulkarni’s book, The Value Elephant, promises a nuanced approach to readers on building lasting wealth.books Updated: Dec 26, 2015 15:30 IST
Kulkarni is not a nuts-and-bolts shopfloor person. Rather he is an original thinker who has honed his skills as ‘boutique’ management consultant focused on value management. With this experience as weaponry he has written a fairly voluminous book which he bills as an attempt to help the reader “practice the art — and science — of Value Creation”. Kulkarni makes the huge assumption, of course, that the reader has both drive and urge to master this subject and thereby create wealth for himself.
To smother curiosity, Kulkarni begins right away posing on Page 1 the cogent albeit humdrum basic question: What is Value Creation? Interestingly, he makes a daring promise to provide not just “a proper view” but also “a nuanced understanding” of this subject so the richly informed reader can “build lasting wealth”.
Not surprisingly he sums up the path to this end as “tough”. However, to make it reader friendly the book is set against the backdrop of the Indian markets, business environment, ethos and way of life. It guides readers to identify businesses that are underpriced but have potential for strong performance. Kulkarni’s subjective guideline for interpreting Value “rests on three pillars — Growth, Risk and Operating Performance abbreviated to V-GRO”. At this point, having introduced V-GRO, Kulkarni astutely forestalls readers’ sarcasm by describing their usual reaction: “Hey, this is terrific! Is it possible to build lasting wealth by adopting this approach?” He then takes up over 300 pages to say why the answer is “Yes”. To whet the reader’s appetite for money he temptingly promises: “On an average, the V-GRO portfolio delivers about four to five times the returns in excess of the broad benchmark index over a period of about five years.” It sounds an astonishingly tall promise and this reviewer is inclined to take it with a large pinch of salt.
Now for the final point. Modesty is not Kulkarni’s forte. Some lines are meant to stun: “This book not only draws from the fundamentals of economics and finance, but also reflects upon nuances in human behaviour drawn from psychology and the behavioural sciences. It provides you with a holistic view of the ‘value elephant’. It lays out a common sense approach to improve your chances of success. It can help you build lasting wealth. Well, you are about to begin a remarkable journey into the world of Value Investment and Value Management. This journey, I hope, will be as rewarding and profitable for you as it has been for my clients, investors and me.”
This reviewer will surely give credit where it’s due. Some of Kulkarni’s anecdotes — alas, too long to be quoted here — are delightful. They bring laughter but emit warning signals too: Don’t follow the crowd; Beware, Common Sense is Not Common; Always Distinguish Price from Value; Learn to Distinguish Speculation from Investment; Don’t Ever Build Asset Bubbles; What the Wise Man does in the Beginning, the Fool does in the End.
Kulkarni minces no words in being pungently sarcastic. Money managers typically represent large firms. These tend to influence the wealth management business. They hire ‘smart people’ and grant them the best of pay and perquisites. The irony, however, is that these smart guys work to further self-interests, which may not be in the larger interest of the providers of capital. Unfortunately the system as it is today motivates wealth managers to do so.
Kulkarni warns investors: stay away from Initial Public Offerings (IPOs). If tempted, ask how you could possibly profit. Does its price imply realistic performance expectations? If and only if you are convinced the company can deliver performance must you go for the IPO. Clearly serious, not casual, investors will find this treatise on V-GRO very relevant.
Sujoy Gupta is a business historian and corporate biographer